Upward variation of periodical payments after the recipient’s financial recklessness – an answer at last!

In February 2017 I wrote an article on the case of Mills v. Mills [2017] EWCA Civ 129 (http://becket-chambers.co.uk/2017/02/28/upward-variation-periodical-payments-recipients-financial-recklessness-political-hot-potato/) which considered whether capital needs could, in effect, be revisited in a future application to vary periodical payments. The case has now been reconsidered by the Supreme Court; here I provide a reminder of the original article with an update containing the appeal decision.

“The case that has caught the attention of the sensationalist press recently is that of Graham and Maria Mills. Divorced in 2002, Mrs Mills was at that time awarded a lump sum of £230,000 and periodical payments of £1,100 p.c.m for the parties’ joint lives. Some 15 years later, the Court of Appeal was considering her application to vary the monthly payments upwards under s.31 of the Matrimonial Causes Act 1973.

The application for the increase in her payments was on the back of Mrs Mills having made poor investment decisions and ending up in rented accommodation, unable to meet her basic needs. She had purchased a series of properties in London, over-financing herself on each occasion and with nothing to show for the money received in 2002.

Despite strong opposition from the husband through his counsel, Philip Cayford QC, on the basis that the wife must become independent and that it was not for Mr Mills to bail her out, the Court of Appeal upheld the increase in the payments to £1,441 p.c.m. This order was understandably unpopular with Mr Mills, who has since remarried and has a new family. It is also, it appears, unpopular with the popular press.”

The Court of Appeal judgment concluded that the wife’s needs were greater due to the need to pay rent, and that the husband could afford to pay the increased amount to the wife. It increased the periodical payments order accordingly.

The husband appealed and was granted permission on one ground. At para 1 of the judgment ([2018] UKSC 38) Lord Wilson (giving the only judgment) summarised the question before the court as follows:

“In circumstances in which at the time of a divorce a spouse, say a wife, is awarded capital which enables her to purchase a home but later she exhausts the capital by entry into a series of unwise transactions and so develops a need to pay rent, is the court entitled to decline to increase the order for the husband to make periodical payments to her so as to fund payment of all (or perhaps even any) of her rent even if he could afford to do so?”

The decision of the court was that the answer is yes, a court could – in those circumstances – decline to increase a periodical payments order notwithstanding that it would leave the recipient with a shortfall. The judgment identifies three relevant authorities which had been correctly decided: Pearce v Pearce [2003] EWCA Civ 1054, North v. North [2007] EWCA Civ 760 and Yates v. Yates [2012] EWCA Civ 532. In particular, the well-known passage in North was cited:

“The order must be fair both to the applicant in need and to the respondent who must pay. In any application under Section 31 the applicant’s needs are likely to be the dominant or magnetic factor. But it does not follow that the respondent is inevitably responsible financially for any established needs. He is not an insurer against all hazards nor, when fairness is the measure, is he necessarily liable for needs created by the applicant’s financial mismanagement, extravagance or irresponsibility. The prodigal former wife cannot hope to turn to a former husband in pursuit of a legal remedy, whatever may be her hope that he might out of charity come to her rescue”.

The conclusion of the Supreme Court was that a court would be ‘entitled’ rather than ‘obliged’ to refuse the wife’s application for an increased monthly sum in the circumstances, so that the husband would not be required to meet her payments of rent. The use of the word ‘entitled’ is clearly a reminder that all such cases are fact-specific, and the judgment referred to the “wide discretion” available under section 31(1) and (7) of the Matrimonial Causes Act 1973 when deciding variation applications. However the court did go further, stating that “a court would need to give very good reasons for requiring a spouse to fund payment of the other spouse’s rent” in circumstances where capital provision for housing had already been made in the original order. Lord Wilson concluded that “[a] spouse may well have an obligation to make provision for the other; but an obligation to duplicate it in such circumstances is most improbable” [40].

What are the implications going forward? One can quite image payors of periodical payments orders (particularly those for the parties’ joint lives) are breathing a sigh of relief, and it is helpful that the guidance in North v North has been approved. However it seems likely that the popularity of term orders and section 28(1A) bars will continue with those representing the wealthier spouse so as to avoid litigation such as this.

Holly Coates is a member of the Becket Chambers Family Finance team.